The Trump trade has triggered turmoil in the currency market
In November, former US President Trump won the election, marking the initial signs of the so-called 'Trump trade', which negatively impacts European exporters and tariff-sensitive assets like the Mexican peso, directing funds towards US stocks and the dollar. However, the market in December may be full of uncertainties, as the Trump trade strategy could be vulnerable to a rebound in the bond market, and tariff measures might raise inflation and disrupt supply chains.
The euro suffered a heavy blow in November, experiencing its worst monthly decline since early 2022, with a drop of over 3% against the dollar, hovering around 1.05. The main reasons include risks from US tariffs, political turmoil in Germany and France, and a sharp decline in regional economies. Analysts expect that as debates heat up regarding the euro's potential for further decline and whether Trump can unilaterally boost the US economy, volatility in the currency market, with a daily trading volume of $7.5 trillion, will intensify. During the month, the Mexican peso fell over 1% against the dollar, and the British pound dropped nearly 2%. Monex Europe's senior market analyst Nick Rees raised the question: Is the forex market's key issue whether Trump's victory signals a fundamental structural change in the global economy or merely a panic reaction from the market?
BTC Opportunities and Challenges Coexist
In November, Bitcoin performed remarkably well, soaring 37% due to expectations of an improved regulatory environment for cryptocurrencies under Trump's administration, briefly nearing the $100,000 mark; the last time such a substantial increase occurred was in February with the influx of funds into the new US spot Bitcoin ETF.
Opinions on future trends in the industry are mixed. Some believe that Bitcoin breaking the $100,000 mark will push it towards mainstream investment; AJ Bell investment analyst Dan Coatsworth stated that if this happens, it will attract more attention to cryptocurrencies. However, there are also concerns about the risk of excessive speculation, as Bitcoin could sharply decline after a rise, resulting in losses for investors.
Tech Stocks Face Supply Chain and Investment Risks
The Nasdaq 100 index, a key index for technology stocks on Wall Street, achieved its best monthly gain since June in November, driven by a 33% increase in Tesla shares, a company allied with Trump, and an early surge in artificial intelligence that helped Nvidia continue to rise, despite a slowdown in sales growth expectations.
However, risks are gradually emerging for US tech stocks as Trump's tariff plan threatens their supply chains; the surge in AI spending by super-scale companies like Microsoft, Meta, and Amazon has raised concerns among investors. Mikhail Zherev, manager of Amati Global Investors' innovation fund, stated that the 'arms race' among major super companies may have led to over-investment, resulting in reduced exposure to AI. The European Central Bank warned last week that if the AI 'bubble' bursts and leads to a crash in tech stocks, it will have negative spillover effects globally.
Divergent Trends in US and European Bank Stocks
Investor attitudes towards US and European bank stocks are markedly different. In November, the US bank stock index soared 13%, achieving its best monthly performance in a year, thanks to expectations of relaxed regulations under the Trump administration. Meanwhile, European bank stocks fell 5% this month due to a weak eurozone economy and rising market expectations for interest rate cuts, although they still rose 16% year-to-date due to relatively high loan rates. A report from JPMorgan's client brokerage indicated that while performance was decent, hedge funds continued to net sell European bank stocks. Deutsche Bank reported that the European banking sector needs to strengthen its asset and wealth management and trading and investment banking fee activities.
Divergent Trends in the Global Bond Market
In November, the trends in major global bond markets diverged, breaking the previously synchronized fluctuation pattern. The yield on 10-year US Treasury bonds changed little by the end of November, but is still expected to rise due to strong data and rising expectations for inflation and fiscal deficit under Trump’s policies, having surged 60 basis points since mid-September, with Capital Economics predicting it will reach 4.5% by the end of the year. The yield on 10-year German bonds fell over 20 basis points this month to about 2.15%, marking the largest monthly decline since 2024, due to weak economic activity, threats from Trump’s tariffs, and escalating conflicts in Ukraine. The yield on Japan's 10-year bonds saw its largest monthly increase since May, partly due to speculation about an interest rate hike next month following the depreciation of the yen after Trump’s victory.
The information provided in this article is for reference only and does not constitute any form of advice.
